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Relationship Marketing

Coca-Cola in India

Listen to this postPharmacist produced in 1866 a syrup that if mixed with carbon ated waste would produce a delightful drink that later became known as Coca-Cola through the leadership of Asa Candler (Polk, 2008). Coca-Cola Company is well-k nown for its cola drink Coke although the company has 400 non-alcoholic beverage s distributed around the world supported with operations in 200 countries (Holco mb, 2008). Coca-Cola brand strength is supported by its worldwide distribution a nd availability (Peter & Donnelly, 2006). In August 2006, Coca-Cola Company stat ed that their products are tested using European standards and did not break any laws in India. However, Coke was found containing pesticides 24 times higher th an the European standard by an Indian laboratory that Coca-Cola discredit (Burne tt & Welford, 2007). Coca-Cola has many bottling plants which are in different l ocations in India sharing large quantities of water to local farmers especially during seasonal droughts (Burnett & Welford, 2007). The purpose of this qualitative study is to find, through secondary data review the relationship between Coca-Cola leadership in Indian market and the effects o f its wrongdoing on its marketing effort. The literature review and secondary da ta collected will identify the effect of Coca-Cola relationship marketing mistak es and recommend an international relationship marketing plan for its foreign ma rkets especially India and the surrounding countries. The following case study w ill attempt to answer the following questions: 1. What kind of relationship marketing strategy is required to replicate the business model in an international market? 2. What will be the best course of action when the international business dev iate from the company s values? 3. What would be the best marketing relations strategy between two different cultures? What was the Problem Coca-Cola and its main competitor, PepsiCo had saturated the local U. S. A. and Europe markets. Coca-Cola found India to be a good market for its products becau se of the large population and the low-cost labor to operate its bottling plants . International markets are usually different from the local market, which neces sitates different marketing strategy and stronger relationship building effort. Coca-Cola had difficulty in handling the protesters around its bottling plants a lthough nearby breweries are consuming similar water quantities and produce equi valent waste (Burnett & Welford, 2007). Protesters targeted the Coca-Cola s fully owned and operated plants but the licensed plants did not have the same difficu lties. Market needs the long-term relationship between the buyer and seller to maintain growth (Bejou, 1997). Zikmund, Mcleod, and Gilbert (2003) used the term one-to-o ne marketing to describe relationship marketing theory because of the business ow ner s tailored marketing to individuals. The customers are loyal to sellers with h igh product quality if they equate the product price with its value. The relationship marketing theory revolves around three aspects. According to Zi kmund, Mcleod, and Gilbert (2003), the first aspect is financial incentives, in which the customer receives rewards or discounts in exchange for their repeated business. The second aspect is social bonding between the company and the custom er. The third aspect is structural interaction. The relationship marketing impor tance resides in the strong bonding between the company and the customers which result in long-term relationship that allows the business owner to plan, stock a nd provide products wanted repeatedly by the loyal customers (Hair, Bush, & Orti nau, 2003). Coca-Cola target customers who will benefit from its products in exc

hange for their profitable and repeated purchase (Peck, Payne, Christopher, & Cl ark, 1999). Coca-Cola built bottling plants in India to strengthen its relations hip with the Indian customers in exchange to their loyalty. However, Coca-Cola h ad malpractices that seriously affected its relation with the Indian consumers. The problem is Coca-Cola plants in India consume water when it is a scarce resou rce, pollute the underground water resources and dump hazardous materials like l ead and cadmium while bottling a drink that contains pesticides (Burnett & Welfo rd, 2007). Indian states banned the sale of Coca-Cola in governmental institutio ns and Pollutions Control Board of Kerala closed a bottling plant after a length y protest by the villagers. Coca-Cola acknowledges their safety standard violat ion by failing to take toxicity test on one of their dumping sites. Significance of the Study Coca-Cola Company had difficult challenges in India and was not treated similarl y to the local businesses. Coca-Cola faults and wrongdoings are documented and a pproved, which obliged the company to react according to international norms and business ethics. Coca-Cola s values call for a leadership that have the courage to shape a better future and an integrity to be real ( Our Company, 2009). Coca-Cola Co mpany had a leadership challenge when one of its employees filed a suit accusing Coca-Cola of inflating Burger King s study in 2002 (Polk, 2008). The results of t he study were exaggerated to show higher profits from soft drink test. Coca-Cola fired several executives and paid $21 million to Burger King (Polk, 2008). Coca-Cola Company had situations in India that clearly contradict with its missi on and values. These situations require the right leadership to acknowledge them , responsibly act to correct the wrongdoings and set up measures to prevent its reoccurrence. The study will produce a set of recommendations to achieve the abo ve requirement and recommend that Coca-Cola either pay to remedy the damages or recuperate the harm done in India. Committed customers would forgive the seller if the mistakes or harm are minor b ut the same committed customers would be increasingly dissatisfied if the level of perceived wrongdoing increases (Ingram, Skinner, & Taylor, 2005). Regular cus tomer would not tolerate wrongdoing and will not forgive the sellers for mistake s although they committed with the good intention. Customers may retaliate by bo ycotting the seller or organize an offensive campaign to state their objection ( Baxter, 2007). One of the best customer disobedience examples started in the 196 0s like dolphin killing by tuna fisherman, unethical treatment of animals and th e anti-fur campaigns (Baxter, 2007). Most of these campaigns are still holding s trong and have large and effective base of supporters. Ingram, Skinner and Taylo r (2005) recommend that sellers like Coca-Cola should have a contingency plan in case unintentional wrongdoing take place to recover from the impact of the situ ation. Literature Review Analysis Coca-Cola is a non-alcoholic drink that is marketed as a joyful and refreshing d rink for all age groups. Coca-Cola Company s mission statement is to refresh the w orld, inspire moments of optimism and create value ( Our Company, 2009). Coca-Cola s values include leadership, collaborations, integrity and accountability but Coc a-Cola s practices have serious implications that contradict its values. Prospect theory gives marketers the chance to use the customers risk-averse behavior to st eer their decision toward a profitable choice for the company. Company practices are legal and ethical because the choice was made by the customers who build it on their internal risk-averse behavior (Novemsky & Kahneman, 2005). Coca-Cola Company has more than 400 non-alcoholic beverages that include Coke, w ith distribution and bottling operations in 200 countries (Holcomb, 2008). CocaCola brand strength is supported by its worldwide distribution and availability (Peter & Donnelly, 2006). Coke is the most famous soft drink produced by Coca-Co la Company and is consumed around the world. Coca-Cola Company stated that their

products are tested using European standards and did not break any laws in Indi a. However, Coke was found containing pesticides 24 times higher than the Europe an standard by an Indian laboratory, which Coca-Cola discredit (Burnett & Welfor d, 2007). The Indian bottling plants consume large quantities of water, which is much needed by the farmers especially during seasonal droughts (Burnett & Welfo rd, 2007). The principle let the buyer beware is opposite to the relationship marketing princ iple in which the seller seeks long-lasting relationship with the customer. The relationship is maintained by stating the facts and giving the necessary informa tion to the customer. Relationship marketing takes part of the risk to prevent a ny risk that the buyer may encounter from the selling and buying experience. The relationship marketing strategies are concerned with the development and enhance ment of relationships with a number of key markets ( imberov, 2007, p. 207). Markete rs should not subscribe to the caveat emptor principal because it makes the rela tionship between the seller and the buyer deteriorate. Inks, Avila and Chapman ( 2004) found that buyers are more ethically sensitive to unethical behavior. Buye rs have stronger negative reaction to lying when this lying was from the seller; however, the buyers were less sensitive to their deceit (lying) because they ju stify it with the resulting low price. Companies seek customer s commitment by deferent means; however customer commitmen t can result from satisfying the customer by offering him or her good product or service in exchange for his or her money. Satisfaction comes from product quali ty and service quality, which is supported by price fairness (Worrall, Parkes & Cooper, 2004). Polk (2008) state that managers should be accountable for the com pany s innovations and the change it leads to successfully. Managers should abando n old ideas when they become a threat to the organization but learn that failure s are opportunities to learn. Peter Drucker stated that the organizations profi t is necessary to supply capital for future innovation and expansion (Drucker, 2 004). Chiung-Ju and Wen-Hung (2008) listed different tactics the retailers use to enha nce customer loyalty that branch from financial, social and structural bonding a ctivities. Financial bonding includes discounts and interest rate. Social bondin g is the relationship created between the two parties during a business interact ion and follow up interactions (Chiung-Ju & Wen-Hung, 2008). The final tactic is structural in which the organization set up rules, policies and procedures to s tructure its relationship with the customers. Survey of 205 companies reported that more than 50% of surveyed companies are ge nerating 75% of their sale from the existing customers (Carter, 2008). Customer loyalty is important because almost all of the companies had lost a top customer to a competitor in the last three years (Carter, 2008). The surveyed companies measure their customers retention that indicates the company s awareness of the cu stomer retention importance (Carter, 2008). The most important finding of Carter (2008) survey was the strong link between customer retention and customer satis faction. Companies would benefit of generating 75% of their sale from a satisfie d and retained customer. On the contrary, East, Hammond, and Gendall (2006) sta te that customer retention importance is overvalued and companies should target customer acquisition strategy. Customer retention strategy gains are less than c ustomer acquisition according to East, Hammond, and Gendall (2006). Palmatier et al. (2009) state that loyal customers will experience strong pressu re to reciprocate the benefits they received from others when they receive good service. People take the gratitude role when they receive benefits and suffer th e guilt of not repaying the favor to the other party so the at least remain loya l to the favor maker. Roehm and Brady (2007) state that half of the researched c ustomers switched brands because of a service failure or inappropriate response from the. Relationship marketing strengthen the relation with the customers but

these customers have higher desire to revenge the brand when their complains are not addressed appropriately (Grgoire, Tripp, & Legoux, 2009). Customer Relationship Management (CRM) main function is to increase the profitab le customers retention effectively by building and maintaining positive relations hips (Payne & Frow, 2006). One of the main functions of CRM is to provide the or ganization with a single view of the customer, in which view the information may be split into different disciplines and categories (Tuck, 2008). Payne and Frow (2006) research on implementing a successful CRM resulted in identifying four e lements that start with assessing the organization s readiness for a CRM initiativ e to estimate the effort needed to establish CRM; and help in the next step of m anaging the change wanted for the organization to adopted and implement CRM proj ect. CRM implementations should be treated as a project and managed as a project that necessitates employees engagement (Payne & Frow, 2006). Tuck (2008) state that CRM should be managing customer relationship but lately C RM became associated with software packages and the difficulty of setting one up . Tuck (2008) claims that CRM projects shifted the organizational focus to deplo ying and operating the software package instead of targeting business processes that would deliver the segmented information in a useful way to the organization . Crosby and Caroll III (2008) realized the difficulty in the customer management and suggested the following guidelines to help the organization better manage it s customers: 1. Stated customer goal: state customers expectations or what they would like to receive from their relationship with the organization, and match them with t he organizations internal goals. 2. Set clear customer strategy to better serve the customer. The organization s can excel in operational excellence like Southwest airline does or product leader ship like Apple s innovative products or customer intimacy in the way Ritz-Carlton tr eat their customers. These strategies would help serve and retain the customers. 3. Define customer governance by appointing a chief customer officer with a t eam and resources to govern the customer s needs. 4. Create roadmap for the customer s external and internal goals and support th em with a strategy that ensures an adequate budget to the communication and moti vation plans. The three articles discuss the ease in losing the CRM focus to other unrelated i ssues like setting up the CRM software package or forcing the CRM program into a n organization although it is not ready for the change required for CRM program. Discussion Coca-Cola s values include leadership, collaborations, integrity and accountabilit y but Coca-Cola s practices have serious implications that contradict its values. Coca-Cola acknowledges their safety standard violation by failing to take toxici ty test on one of their dumping sites. International markets are usually differe nt from the local market, which necessitates different marketing strategy and st ronger relationship building effort. Indian protesters targeted the Coca-Cola s fu lly owned and operated plants but the licensed plants did not have the same diff iculties. The purpose of this case study is to identify key leadership factors t o build a strong international relationship marketing plan for foreign markets. Coca-Cola followed the caveat emptor principle or let the buyer beware that is opp osite to the relationship marketing principle in which the seller seeks long-las ting relationship with the customer. Indian customers are consuming beverages th at contained harmful substances without the knowledge of such contamination. Coc a-Cola selected not to do the standard tests and when the tests were done the re sults were not published to the customers. The bottling plants are consuming sca

rce resources and contaminating the surrounding agricultural land. Coca-Cola implemented its bottling and distribution model in India with good suc cess but while damaging its brand name, at least locally, and losing many custom ers to the local competitors. Coca-Cola should implement a well structured custo mer relationship management to polish its brand name and act ethically similar t o the way it does its bottling and distribution in U. S. A. and Europe. The sugg ested relationship management effort should be customized to the Indian culture and address the political and religious differences in the local area. The research limitations were its dependence on secondary data only without cond ucting structured interviews with the local customers. However, the research fin ding may be applicable to the neighboring countries if a soft drink company wish es to start a business in India and surrounding countries.

What Coca-Cola Did Wrong, And Right, In China Shaun Rein, 03.24.09, 06:00 PM EST The company moved very wisely in trying to buy Huiyuan--except when it came to d ealing with the government and the law. pic More from Shaun Rein Last week the Chinese government rejected Coca-Cola's planned $2.3 billion acqui sition of the Chinese company Huiyuan Juice, despite Coke's announcement a week earlier that it would commit $2 billion on top of that to expansion in China ove r the next three years. When the government declared the deal dead, a chill blan keted boardrooms around the world. Is the climate for foreign firms in China coo ling? Is protectionism rearing its ugly head? What happened? Article Controls imageemail imageprint imagereprint imagenewsletter comments (2) imageshare imageDigg It! imageyahoo imageFacebook

imagerss Retail sales in China are still growing at a double-digit rate despite the globa l financial turmoil. The country can no longer be considered an emerging market for many brands. It became the largest market in the world for automobiles earli er this year; car sales rose 25% in February after the government started issuin g tax rebates for small engines. Companies are getting more and more of their re venues from China; Yum! Brands (nyse: YUM - news - people ) generates about a th ird of its revenue from its KFC and Pizza Hut sales in China. If the country tur ned inward, the effect on the bottom-line of businesses from Unilever to General Motors would be huge. However, China's government went to great lengths to indicate that the rejection of the deal was about monopoly, not protectionism. My own observations suggest that local officials throughout the country are green-lighting more investment p rojects faster now than at any time in the last three years, as fears about over heating and inflation give way to worries that more jobs will be lost on top of the 20 million already gone. While what some see as socialism creeps into American economic policy, China is going all out to jump-start its economy by becoming more capitalistic. Local off icials in Beijing have even awarded a $300,000 automobile to a CEO for hiring a record number of people. As companies look for ways to grow in a stalled economy, emerging markets, and C hina in particular, seem to be their best bets. Coke's failed bid for Huiyuan of fers several lessons about how to take advantage of China's continued economic s trength. 800 Million Emerging Consumers Comment On This Story Huiyuan would have given Coke much-needed market penetration in third- and fourt h-tier cities. Most companies go into China looking to target Shanghai and Beiji ng. They ignore less-developed areas because they think the consumers there are too poor to buy high-priced foreign goods. But Coke was smart to seek a way to r each those less-developed markets. They are where the real consumer growth will come in the next decade. Related Stories * * * * * Defensive Stocks Like Coke And GE Far From Immune To Europe Coke Profits Up 12%, Sales Surge 45% With LatAm, Asia In The Lead The Largest U.S. Companies With Big European Exposure Bond Vigilantes To Target France As Italy Is Past Point Of No Return How to Enter and Compete in Market Sanctuaries

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* Stories * Videos Those areas are home to roughly 800 million Chinese consumers. They may not have as much disposable income as their counterparts in the megacities, but they do spend. They have been relatively shielded from the financial panic, and the gove

rnment is trying to boost their consumption with a 13% rebate on many home appli ances, such as air conditioners, refrigerators and televisions. It's also trying to improve their health care coverage. My firm, the China Marke t Research Group, conducted interviews in 10 cities in the last two months and f ound that second- and third-tier consumers had the highest levels of optimism. M ore than 70% of them predicted that they would spend more in 2009 than in 2008. China Mobile (nyse: CHL - news - people ) gets that message. It's the world's la rgest telecom company, with more than 600 million users, and it derives more tha n half its new subscribers from China's smaller cities and towns. China Mobile h as wisely priced value-added mobile services like downloadable ringtones and tex t messaging low enough to cater to those consumers. Its average monthly fee per consumer is a low $12, but multiply that by hundreds of millions and and you sta rt to see the dream of getting rich by selling one widget to every person in Chi na. To cater to those emerging consumers, companies may need to scale down their pro ducts, because many people can't afford to buy large but still want to buy the b est. Homes are so tiny that people want packaging they can store in nooks and cr annies. Coke made the right play in trying to gain access to those markets insid e China. They will be the next great battleground for business. The Health-Conscious Chinese Consumer Coke was also smart to try to buy Huiyuan, with its healthy image. Its fruit jui ces are popular among younger Chinese consumers between the ages of 22 and 32, w ho are willing to pay more for healthful and safe products. Coke has been losing market share in beverages to companies like Wang Lao Ji, an herbal tea producer , because Chinese consumers prefer juice and teas to colas. In fact, they buy mo re Sprite, a Coca-Cola (nyse: KO - news - people ) brand, than Coke itself. They think of Sprite, with its lemony taste and clear color, as healthier than cola. In a country where tainted food scares and pollution problems plague daily life, younger consumers willingly shell out for products they think are good for them . We found that younger consumers are willing to pay 20% to 30% more for premium construction materials for their unfinished homes. DuPont (nyse: DD - news - people ) has capitalized on that trend by providing Ch inese homeowners with home construction and decoration products and services tha t emphasize health and safety. The company charges more than its native competit ors, but it is driving major growth in China by catering to younger consumers wh o demand healthy and safe products. Honor the Ruling Party! The ultimate lesson of Coke's failed attempt to acquire Huiyuan is that companie s must always look long and hard at China's laws. Foreigners complain that those laws are often opaque and whimsically interpreted by local officials, but in fa ct the laws governing major purchases are fairly straightforward. As Chinalawblo summed them up, "Foreigners are permitted to purchase non-majority interes ts in strong, successful Chinese companies, but only if there is some added bene fit, such as transfer of technology, advanced management or access to foreign ma rkets." Coca-Cola thought the government wouldn't mind the sale of a nonstrategic asset, but a simple reading of the relevant Chinese laws would have shown that the gov ernment doesn't want foreign firms to buy controlling stakes in large national p layers that don't need financial or management help.

Nonetheless, China is moving toward greater competition. It is wary of monopolie s and is trying to build more national corporate champions like the appliance-ma ker Haier and the sports apparel firm Li Ning. The official justification of the deal's rejection was that it would reduce competition. Huiyuan controls 8.5% of the country's fruit and vegetable juice market and 40% of its pure juice market ; Coke already commands more than half of China's soft drink market and 12% of i ts fruit and vegetable juice market. In many cases, acquisition is the right approach. You just have to be sure to co nsider the laws before embarking on an expensive and time-consuming acquisition strategy, even if you've been as good a friend to China as Coca-Cola has been. In short, the lessons from Coke's failed bid for Huiyuan are that you should def initely look beyond Beijing and Shanghai to under-served markets, you should und erstand that younger consumers often spend more than older consumers--and you mu st honor the ruling party and its laws.

Why Coca Cola Blak Failed Danielle Cleghorn Coke Blak was one of many, many efforts Coca-Cola Company made to improve the de clining cola sales of 2005. The product development department had the not so in genious idea to grab on the coattails of the Pepsi-Starbucks frappacino idea and develop a coffee flavored cola. This concoction took approximately two years to develop, which tasted exactly like you would expect it to taste: pouring your c up of cheap coffee into your can of coke. Why would it take Coca Cola two years to nail down a product that took my three year old son approximately two seconds to master? It could be because "Coke introduced more than 1,000 products in 200 5" and could have "over-dilute the new product development and launch resources. " Regardless of the reasons why it took so long to develop, one fact remains gla ringly clear. Coke Blak tasted dreadful. Many tastes tests have been conducted for this product and the consensus is that Coke Blak was a beverage that would not be consumed more than once. Coca-Cola s eemed to ignore this evident fact even when Marc Mathieu, Senior VP, Global Bran ds for the Coca-Cola Company, presented Coke Blak at the PDMA conference in Atla nta, GA. "Mathieu had a friendly audience at the 2006 presentation. The Atlanta area is t he location of Coca-Cola's corporate headquarters. No samples were provided duri ng the presentation. The break after the presentation featured legacy Coca-Cola products but did not include Coke Blak. The event staff was not familiar with Co ke Blak." Was this an oversight or a deliberate move by Coca-Cola executives to postpone t he inevitable consumer's negative reaction? My money is on the later. Nick Gerli ch's post on truly sums up my opinion regarding why Coke Blak only survived a mere 16 months: